How Embracing Digital Transformation in Commercial Real Estate Saves Money and Creates Opportunities
Real estate, which arguably originated in the Roman period with the Roman law of property and possession, seemingly has few avenues for substantive change. Intuitively, this makes sense — after a couple of millennia, there are traditional real estate methodologies that rule the industry. However, despite the sparse change and innovation, recent developments and investments in technology have been made to modernize this field. Though real estate is rich in tradition and slow to change, there are potentially even richer opportunities for those who embrace real estate technology trends.
The Emergence of Proptech Companies
A newer generation is driving digital transformation in commercial real estate, and investors have taken notice. In 2021, venture capital firms poured $32 billion into future commercial real estate tech disruptors. Perhaps even more impressive, given economic uncertainty, inflation, and tech job layoffs, investors injected almost $20 billion into proptech companies in 2022. Talented developers work in proptech, and investors are willing to bet on their success.
Nearly every department has sophisticated tools, such as sales teams with CRMs. Most commercial real estate departments, conversely, still rely on Excel spreadsheets and manual inputs. Proptech companies are working to improve that functionality to upgrade the day-to-day operations of real estate organizations and provide solutions.
What Is the Value of Real Estate Automation and Software?
The status quo is safe and comfortable. With economic headwinds looming, it’s natural for business leaders to ask, “Is this the right time to adopt real estate technology trends?” They’re wise to exercise caution, but the answer is a resounding yes.
Commercial lease management software gives tenants a competitive edge to succeed in a challenging environment. With their lease portfolio data at their fingertips, tenants can be far more strategic about their real estate decisions. Here’s how:
1. Improved landlord negotiations.
Having a single source of truth that everyone is working from is crucial in today’s environment. While a few key people might be putting pen to paper and executing lease or sale documents, the truth is that transaction management is a long and nuanced process between the landlord, the tenant, and their respective representatives, involving many parties (such as brokers, attorneys, and auditors).
There’s an overwhelming amount of data to manage for landlords, including information on site selection, zoning, utilities, foot and vehicle traffic, taxes, build-out negotiations, and title commitments.
A single platform to manage these items and provide both reliability and continuity of information is critical in an environment where entering into a poor, binding investment or missing an opportunity for a site with better potential can cause serious economic pain.
A system that stores, manages, processes, and provides the same data to everyone goes a long way in ensuring that critical processes and dates are not missed.
2. Streamline administrative tasks.
Lease automation streamlines administrative tasks and saves time and costs, leading to more productive use of your employees’ time. Employees are constantly dealing with competing demands for their time and attention. If you can remove stressors, such as varied spreadsheets, PDFs, and Outlook notifications, and put them into one platform, then you can dramatically reduce decision fatigue. In addition, automation software saves time lost from context switching and task mismanagement.
The potential savings in this area are significant. Today, the risks of not adopting automation in the workplace are overtaking the risks of implementing new technology. With an estimated $1 trillion lost each year in task mismanagement, there are tremendous upsides in investing in technology that eliminates key entry errors and standardizes tasks, such as giving employees more time for creativity and strategy.
3. Sophisticated financial reporting.
Lease automation provides powerful data analysis that can relay down-date information about your portfolio. You can proactively assess your rent obligations by having a stronger understanding of fixed and various lease costs. Eliminating tedious data manipulation gives you more time to analyze and plan for critical opportunities. If you find that certain types of buildings or areas no longer serve your business, for example, it might make sense to avoid expanding there.
Conversely, if several of your stores perform well next to complementary businesses — for example, a gym next to a juice chain — then the team can proactively look for those opportunities in their acquisition searches and have compelling cases to make to lenders and other stakeholders. Automating data removes the guesswork and allows you and your team to apply your talents in a focused and precise manner.
Real estate is slow to change, and caution has served many real estate veterans well. However, there is the question of whether it has become riskier to maintain the status quo or to explore and implement modern solutions. Despite being more comfortable, savvy real estate professionals should realize it’s time to ditch tools like the scrolls and quills the Romans used and invest in automation software.
Featured Image Credit: Provided by the Author; Photo by John Schnobrich; Unsplash; Thank you!
Matt Giffune is a co-founder at Occupier, a lease management software platform helping commercial tenants and brokers manage their real estate footprint and comply with lease accounting standards. Occupier’s software helps teams make smarter, more informed lease decisions by centralizing the way they work. In turn, teams ensure alignment between their real estate decisions and business successes. Prior to his work at Occupier, Matt held leadership positions within commercial real estate and technology sales. He’s currently based in Boston.